In a move designed to facilitate the flow of foreign investment in Ukraine, on 5 May 2016, the National Bank of Ukraine (NBU) issued the Resolution No. 308, effective 11 May 2016, which is supposed to simplify settlements between parties to investment transactions.
By way of background, under the existing Ukrainian capital control legislation, when acquiring shares in a Ukrainian company from another non-resident, a non-Ukrainian investor must pay the purchase price from an account with a Ukrainian bank. With effect from 11 May 2016, non-resident investors acquiring shares in a Ukrainian company are no longer subject to a requirement (the so-called “mandatory FX sale requirement”) to convert 75% of the hard currency funds credited to an account with a Ukrainian bank for the acquisition purposes into UAH.
This is the latest in a series of resolutions from the NBU aimed at relaxing some of the contingency capital control measures previously put in place. In April 2016, among other things, the NBU exempted from the mandatory FX sale requirement proceeds from loan under an agreement between a Ukrainian borrower and a non-resident bank lender, where the loan is disbursed by means of direct payment to a non-resident exporter under a contract with the Ukrainian borrower. Prior to that, such loan proceeds would qualify for an exemption only if the loan were covered by a foreign export credit agency.
In addition, on 28 April 2016, the NBU announced its intent to lift the long-standing ban against the distribution of dividends to offshore accounts of shareholders in local companies. The NBU has committed itself to come up with a schedule that would provide for the gradual repatriation of dividends by non-resident shareholders of Ukrainian businesses following a review of the IMF Extended Fund Facility Program.
These developments are in line with the Government’s strategy to improve the investment climate in Ukraine and should facilitate Ukraine’s significant privatisation plans for 2016.